Serialized system for image replacement documents

ABSTRACT

An improved process for clearing bank checks. Paper bank checks are digitized, and the paper checks are placed into storage. The digitized versions are used in the check-clearing process. When paper versions of the checks are required, as when a check is needed for evidence in a lawsuit, a paper version is printed from the corresponding digitized version, each paper version bearing a unique serial number, wherein no two serial numbers are alike. At that time, selected data from the printed check is stored in a database. A recipient of the printed check is allowed access to the database, to verify authenticity of the printed check.

BACKGROUND OF THE INVENTION

The invention concerns a clearing system for bank checks, whereinelectronic versions of the checks, rather than the checks themselves,are transferred among banks. When paper versions are required, they areprinted on-demand from the electronic versions. The paper versions arecalled Image Replacement Documents, IRDs. The invention provides anapproach for preventing fraud or mistake in connection with the IRDs, ascould occur if a given IRD were printed multiple times. Multipleprintings are not desired, because the IRDs are negotiable instruments.

BACKGROUND OF THE INVENTION

Paper bank checks are in widespread use. FIG. 1 illustrates a typicalbank check 3. After the payee 6 receives the check 3, the payee 6 willtake steps by which the check 3 enters a check-clearing system, which inthe United States is operated by the Federal Reserve System.

A special case would occur if the check 3 is presented to the bank 9 onwhich the check is drawn. In that case, the drawee-bank 9 would simply(1) deduct the amount 12 of the check 3 from the account of the drawer18, the account number being contained in the MICR line 15, (2) pay thepayee 6, (3) retain the check 3 rather than entering it into theclearing system, and (4) perhaps later deliver the check 3 to the drawer18 in a monthly statement.

But, in the general case, the check 3 will enter the check-clearingsystem. The check-clearing system performs several functions. One isthat it sorts all the checks according to drawee-bank, and delivers thechecks to the respective drawee-banks.

A second is that it handles money transfers, so that all banks involvedare properly charged and credited. For example, if the payee 6 of thecheck 3 in FIG. 1 deposits the check 3 in the payee's own bank, thatbank will give a provisional credit to the payee's account. That bank iscalled the bank-of-first-deposit, BOFD.

The BOFD then enters the check 3 into the check-clearing system, wherein(1) the physical check is transferred to the drawee-bank 9, (2) a chargeis levied against the drawee-bank 9 in the amount 12 of the check, and(3) a credit is issued to the BOFD in that amount.

The check-clearing system performs additional functions, which will notbe described in detail, but briefly mentioned. It handles issues arisingwhen the drawee bank 9 rejects the check 3, as can occur if the account15 lacks funds to pay the check 3, or if the account 15 has been closed.

It also assures the credit-worthiness of the banks involved, therebyminimizing the possibility that a bank will become insolvent during thecheck-clearing process, and thereby default on a charge which has beenlevied against it.

It also sets up procedural rules, such as specifying the time limitwithin which a drawee-bank must reject a check drawn on an accountlacking funds. If the limit expires, the drawee-bank is deemed to haveaccepted the check.

Therefore, the check-clearing system can be viewed as performing threeprimary types of function. One is that it sorts and distributes thepaper checks to the drawee-banks. A second is that it transfers moneyamong the banks to settle accounts. The third type of function can beviewed as a collection of administrative procedures which enable theclearing system to accomplish the first and second functions in apractical manner. The particular methods in which the functions outlinedabove are presently implemented have evolved for historical reasons,primarily because the checks used always have been paper-based. With thedevelopment of modern electronics and high-speed digital computers, itmay be possible to eliminate some of the steps required in a paper-basedcheck clearing system, to thereby streamline the check-clearing process.

OBJECTS OF THE INVENTION

An object of the invention is to provide an improved check-clearingsystem.

SUMMARY OF THE INVENTION

In one form of the invention, paper bank checks are digitized intodigital images during, or prior to, the check-clearing process, and thepaper checks are placed into storage. The check-clearing is thenaccomplished using the digital images.

Sometimes, paper versions of the checks are required. Paper versions arethen printed based on the digital images. To prevent fraud and mistake,each paper version is assigned a unique serial number. That serialnumber, together with information contained on the check, is stored in acentral database. The database is made available to holders of the paperversions, to verify authenticity.

BRIEF DESCRIPTION OF THE DRAWINGS

FIG. 1 illustrates some components of a bank check 3.

FIGS. 2-13 form flow charts, in pictorial format, which illustrateprocesses undertaken by several forms of the invention.

DETAILED DESCRIPTION OF THE INVENTION

FIGS. 2-10 collectively illustrate a flow chart, in pictorial forms,which describe processes undertaken in Electronic Check Presentment,ECP. In FIG. 2, a check CK is deposited into a Bank of First Deposit,BOFD. For example, the payee “ELECTRIC COMPANY” in FIG. 1 may depositcheck 3 into an account which it maintains in the BOFD of FIG. 2.

As indicated in FIG. 3, the BOFD generates a digitized image DIG CK ofthe check, and places the actual paper check CK into storage.Conceptually, the digitized image is a bitmap, possibly compressed. Ingeneral, any process by which the visual information on the check, frontand back, can be (1) captured, (2) stored in a computer, and (3)transferred over communication links will suffice.

In addition, the BOFD may extract certain data from the check CK, suchas the amount 12 in FIG. 1, the MICR data 15, etc., and store that datain a text file (not shown). The BOFD may keep the text file inassociation with, or linked to, the digitized check DIG CK. That is, thetext file effectively will accompany the digitized check wherever thelatter is transferred.

It is emphasized that the identity of the party who creates thedigitized check DIG CK is not necessarily significant, but the importantevent is that the digital image DIG CK accurately represent the papercheck.

In FIG. 4, the BOFD transfers the digital image DIG CK to a checkclearing system, which in the United States is handled by the FederalReserve System, and is designated FED. The check clearing systemreceives millions of digital checks daily from numerous banks, and theseare represented by the collection of digital checks DIG CKS in FIG. 5.

The clearing system distributes the digital checks DIG CKS to the bankson which they are drawn, as indicated in FIG. 6. Those banks use thedigital checks, or the text file discussed above, or both, to balancethe accounts on which the checks were drawn. In addition, the banks mayuse the digital checks DIG CKS to print paper images of the checks,which may be included in the monthly statements mailed to the banks'customers.

However, not all the banks will necessarily be able to handle digitalchecks, particularly in the initial phases of implementation of anElectronic Check Presentment system. Some will require paper checks, ashave been used traditionally. Thus, assume that BANK_(—)3 in FIG. 7lacks this digital capability, and will need standard paper-basedchecks.

Accordingly, the clearing system FED delivers the digital images 30,representing the checks drawn on BANK_(—)3, to a printing facility 33.The printing facility 33 generates paper representations 36 of thechecks, called IRDs, Image Replacement Documents.

The Inventor points out that now two paper versions of the checks forBANK_(—)3 exist. One version lies in the original paper checks, check CKin FIG. 3 representing one such paper check. In the example ofBANK_(—)3, four IRDs 36 are shown in FIG. 7, so four correspondingoriginal paper checks will exist somewhere in a storage facility. Thesecond paper versions in existence are, of course, represented by thenewly printed IRDs 36 in FIG. 7.

The IRDs 36, that is, the paper versions of the checks, are delivered toBANK_(—)3, as in FIG. 8. The existing paper-based routing system canaccomplish this delivery.

Therefore, as so far described, the drawee-banks have all receivedeither (1) digitized images of the checks drawn on them or (2) paperrepresentations of the digitized images.

It was stated that a text file may be generated for each check,containing selected, or all, information in the check. Thus, threepossible combinations arise in items delivered to the banks:

-   -   digitized checks, plus text file,    -   IRDs, plus text file,    -   IRDs, no text file.        The text file can simplify accounting at the drawee bank, by        eliminating manual data entry.

It may happen that paper versions of the checks may need to be generatedfor other reasons. For example, assume in FIG. 9 that BANK_(—)1 receivesa digitized check drawn on an account lacking finds to pay the check.BANK_(—)1 would thus return the digitized check 50 to the printingfacility 33, or another agency, as indicated by arrow 52. The printingfacility 33, or agency, would generate an IRD 55, and print“INSUFFICIENT FUNDS” on it.

The clearing system FED would deliver this IRD 55 to the BOFD initiallyreceiving the corresponding paper check. That BOFD is assumed to beBANK_(—)3 in FIG. 10.

The BOFD would return that check to the depositor, thereby giving thedepositor a paper check bearing a legend “INSUFFICIENT FUNDS,” orequivalent. Such a document would be useful to the depositor in legalproceedings against the drawer of the check.

To repeat: BANK_(—)3 initially received a bad paper check. That papercheck was digitized, and placed into storage. The digitized version wassubmitted to the drawee-bank, rejected, and the system created an IRD55, marked “INSUFFICIENT FUNDS,” to replace the paper check. That IRD 55was returned to BANK_(—)3. The original paper check remained in storage.

Other situations may arise when the printing described in connectionwith FIGS. 9 and 10 would occur. For example, a drawer may need a copyof a cancelled check because of a dispute over payment.

It is clear that, in the processes described above, a problem can arisebecause numerous identical IRDs could be generated from a single digitalcheck, either through mistake or fraud. For example, when a check isreturned due to insufficient funds in the checking account, an IRD isgenerated which is marked “INSUFFICIENT FUNDS.” That IRD is eventuallyreturned to the payee of the check. However, that IRD is still a validnegotiable instrument. For instance, under the Uniform Commercial Code,that IRD acts as a written promise, by the maker of the check, to paythe face amount of the check, to any valid holder. Further, if theholder is a “holder in due course,” certain defenses to payment are notavailable to the maker of the check against the holder. Clearly, themaker of the check does not want multiple, apparently valid, copies ofthat instrument to exist.

One form of the invention reduces, or eliminates, this problem. FIG. 11illustrates procedures and apparatus which are added to a system of thegeneral type just described. When the digital checks 30 are printed,they are printed onto paper stock 58 having pre-printed serial numbersS/N. Thus, the IRDs 60 are serialized.

In one form of the invention, the IRDs are printed onto ordinary paper,to thereby allow common printing equipment, such as computer laserprinters, to be used. The paper may be fanfold type, as in FIG. 11,ordinary sheet paper, as used in laser printers, or another similartype.

The paper stock 58 may lack serial numbers, and the serial numbers wouldbe generated by hardware and software which controls the printingprocess. Thus, as each IRD is being created, a serial number is assignedto it. Alternately, the IRD can be created on check stock bearingpre-printed serial numbers. In many countries, organizations which settechnical standards have established commercial standards for checkstock, that is, the paper on which bank checks are printed.

In either case (pre-printed serial numbers, or serial numbers printed inreal-time), no two IRDs are printed having the same serial number. Ifthe number of IRDs printed becomes so large that the serial numbersbecome excessively long, then the serial numbers can be re-initializedat a starting point. However, the need for re-initialization is seen asunlikely, as will now be explained.

Many credit cards in the U.S. have account numbers which are 16 decimaldigits in length. A serial number of that length can represent numbersranging from zero to 9,999,999,999,999,999, or essentially 10quadrillion individual numbers. If 100 million checks were printed everyday under the invention, then a different serial number could be printedon every check for 100 million days, without reaching 10 quadrillion.That is, 100-million-squared (or 10**8-squared) equals 10 quadrillion(or 10**16).

As a rough estimate, 1,000 days are about equal to 3 years. Then 100million days correspond roughly to 300,000 years. Therefore, a serialnumber containing 16 decimal digits is seen as adequate.

However, a larger limit on serial numbers can be accommodated by (1)increasing the number of digits, as by using hexadecimal numbers oralphanumeric digits instead of decimal digits, or (2) using a longerserial number, or both (1) and (2).

In any event, no two IRDs are printed having identical serial numbers.

Alternately, if a shorter serial number is used so that the serialnumbers eventually run out, the run-out time is chosen so that no twoIRDs exist in a common practical time frame. For example, if the run-outtime is chosen as ten years, no two IRDs having identical serial numberswill exist in ten years. As a practical matter, two IRDs having the sameserial number, but dated over ten years apart, as could occur in thissystem, are not seen as a basis for fraud or mistake which will causeinjury.

Ten years was just discussed. However, in general, run-out times of anymultiple of six months are contemplated, such as 6, 12, 18, 24, 30, 36months, and so on.

Therefore, as just described, every IRD printed contains a different, orunique, serial number. Alternately, serial numbers may be exhausted, andrestarted. If that is done, then the serial numbers contain enoughdigits so that, when re-start occurs, the possible dates of checkshaving identical serial numbers are so widely spaced that fraud isconsidered impossible.

In addition to serial printing of the IRDs, the invention maintains amaster table 75 as in FIG. 11. That table 75 contains data relating toeach check printed as an IRD (as opposed to all checks cleared). Thedata can be any combination of the following:

-   -   Initial check serial number,    -   Serial number assigned in printing step of FIG. 11,    -   Payee name,    -   Drawer name,    -   Account number,    -   Drawee bank name,    -   Drawee bank routing number,    -   Date of initial issuance, and    -   Date of printing IRD.

Table 75 can be maintained in the form of a relational database, whichwould simplify field-searching. For example, an authorized party couldsearch all amount-fields, and find all IRDs drawn in a specific amount,such as $ 33.33.

Table 75 is made available to any parties having need-to-know of itscontents, and that need is controlled by inter-bank agreements. Thoseparties include (1) the banks to which the paper IRDs are delivered and(2) parties who hold the paper IRDs.

Access to table 75 allows any party holding an IRD to verify whetherthat IRD is genuine. For example, the party would search table 75 usingthe serial number S/N in FIG. 11, printed on the check. The table 75would then specify the relevant data contained on the check. Deviationswould then indicate the check to be invalid, or suspect.

If the source of the IRD is considered trustworthy, the validation ofthe serial number and data printed on the check using table 75 providesconclusive evidence that the IRD is valid. For example, assume apurchaser of an automobile writes a check which is returned forinsufficient funds in the account. The NSF check, in IRD form, returnedto the automobile dealer will be returned by the dealer's bank. The bankis considered trustworthy. The IRD is presumed valid, based on table 75and the trustworthy status of the bank.

In another embodiment, subsets of the data contained in table 75 can bedelivered to drawee banks. For example, as shown in FIG. 12, when theprinting facility 33 prints IRDs, as for banks which are not equipped tohandle digitized checks, the printing facility 33 also collects theentries corresponding to those checks from table 75. In this example,two groups 100 and 105 of printed checks are shown. Entries arecollected into TABLE 1 for the former, and TABLE 2 for the latter.

The clearing system FED then delivers the paper IRDs 100 and 105 to thedrawee-banks, as indicated in FIG. 13, together with the TABLES 1 and 2.Preferably, the TABLES are delivered prior to the IRDs.

Under this approach, BANK_(—)1 and BANK_(—)2 can then compare each IRDwith the corresponding TABLE, to see whether the each IRD corresponds toa check listed in the TABLE. If a discrepancy is found, then a check isseen as suspect.

These tables can also be delivered whenever IRDs are printed.

The Inventor points out that the data in the tables is generated at thetime the IRDs are printed, and thus represent a historical record ofsome, or all, of the information printed on each respective IRD.

The Inventor points out that one function performed by the TABLES shownin FIGS. 10-12 is to answer the following type of question: “Is this IRDgenuine?” Or, more specifically, “Does the data on the IRD in mypossession correspond to that in the TABLE for the same serial number?”.

An invention has been described wherein paper checks are digitized in acheck-clearing system. The paper checks are placed into storage, and thedigitized checks are returned to the drawee-banks instead of paperchecks, or “cleared.” When paper checks are needed, they are printedfrom the digitized checks, each with a unique serial number. Theseprint-outs are called IRDs. They can be printed on check stock, and thestock may be pre-numbered with the serial numbers.

In addition, a table may be generated, which contains the serial numberof each IRD, as well as all, or some, of the data printed on the IRD. Aholder of the IRD may consult the table, to verify that the serialnumber, and all other data on the check, correspond to that in thetable.

Of course, eventually the table will become quite large, containingbillions of entries, or more. Thus, over time, old entries in the tablemay be shunted into a second table. Any party wishing to search for acheck will first search the smaller table for “new” checks. If the checkis not found, then the second table is searched. This can save searchtime.

In one form of the invention, each bank involved is assigned a group ofunique serial numbers. For example, bank A can be assigned numbers A1through A1,000. Bank B may be assigned numbers B1 through B1,000. In thegeneral case, the serial number can contain two parts: (1) a serialnumber and (2) a bank identifier. The serial numbers for different bankscan overlap, and thus be similar, but the bank identifier woulddistinguish the two numbers. The numbers A55 and B55 provide twoexamples. The numbers (55) are the same, but the bank identifiers (A andB) are different.

Numerous substitutions and modifications can be undertaken withoutdeparting from the true spirit and scope of the invention. What isdesired to be secured by Letters Patent is the invention as defined inthe following claims.

1-16. (canceled)
 17. A method of processing a paper bank check in which the paper check is digitized and the digitized check is transferred for clearing, the method comprising: transferring a printed IRD version of the digitized check if returned for insufficient funds, the IRD version being verifiable by access to a database; and providing access to the database to allow the IRD version to be verified.
 18. A method according to claim 17, wherein the IRD version bears a serial number by which other information on the check may be retrieved from the database.
 19. A method of processing a paper bank check in which the paper check is digitized and the digitized check is transferred for clearing, the method comprising: receiving a printed IRD version of the digitized check if returned for insufficient funds, the IRD version being verifiable by access to a database; and receiving access to the database to allow the IRD version to be verified.
 20. A method according to claim 19, wherein the IRD version bears a serial number by which other information on the check may be retrieved from the database.
 21. A method of processing a paper bank check, the method comprising: having the check digitized; having the digitized check presented to its drawee bank for clearing; having a printed IRD version of the digitized check if returned for insufficient funds, the IRD version being verifiable by access to a database; and having access to the database for the recipient of the IRD version to allow the IRD version to be verified.
 22. A method according to claim 21, wherein the IRD version bears a serial number by which other information on the check may be retrieved from the database.
 23. A method of processing a paper bank check in which the paper check is digitized and the digitized check is transferred for clearing, the method comprising: transferring a printed IRD version of the digitized check with a statement from a drawee bank, the IRD version being verifiable by access to a database; and providing access to the database to allow the IRD version to be verified.
 24. A method according to claim 23, wherein the IRD version bears a serial number by which other information on the check may be retrieved from the database.
 25. A method of processing a paper bank check in which the paper check is digitized and the digitized check is transferred for clearing, the method comprising: receiving a printed IRD version of the digitized check with a statement from a drawee bank, the IRD version being verifiable by access to a database; and receiving access to the database to allow the IRD version to be verified.
 26. A method according to claim 25, wherein the IRD version bears a serial number by which other information on the check may be retrieved from the database.
 27. A method of processing a paper bank check, the method comprising: having the check digitized; having the digitized check presented to its drawee bank for clearing; having a printed IRD version of the digitized check with a statement from the bank, the IRD version being verifiable by access to a database; and having access to the database for the recipient of the IRD version to allow the IRD version to be verified.
 28. A method according to claim 27, wherein the IRD version bears a serial number by which other information on the check may be retrieved from the database. 